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Oleg Ossinovski: Georgian Energy Sector is Considered as the Major Direction for Investors

June 29, 20152,784 Views

Foreign investors consider Georgia to be one of the attractive countries in terms of the investment environment.

In the last period, transnational companies and various influential businessmen are showing a growing interest in Georgia. Estonian multimillionaire OLEG OSINOVSKI is among similar businessmen. We offer a full version of his interview.

– In how many countries does your company operate and when did you decide to launch the operation in Georgia?

– Our company is a major railway company in the Baltic countries. We have been operating in 15 countries and hold subsidiaries in 9 countries. As to Georgia, we launched the operation in Georgia 6 years ago. We think this decision was one of the advanced steps for our business expansion.

– Georgian energy sector is considered to be one of the priority directions for investors. You are reported to have some interests in this sector. When did you pay attention to Georgia’s energy sector? What projects have you launched in this field and what is the volume of your investments in this field?

-This is a genuinely interesting field. I travel to various countries by bicycle every year. During one of similar tours in Georgia, I noticed an old HPP at the Goderdzi Pass. The sheet indicated 1930 as the year of construction. Naturally, I halted and I explored whether this asset was in exploitation. The staff confirmed the HPP was working. Then I explored whether the HPP had maintained its original condition or something had changed. They answered nothing had changed for about 80 years and everything was working excellently. This fact made me start thinking and persuaded me investments cannot be outdated in the Georgian power system.

Later we started thorough exploration of this field and launched an implementation of the first project on the river Kintrish. The HPP will open at the beginning of 2016.

This is the first project of ours and we have invested about 10 million USD in it.

– Investment return from HPPs is a long-term perspective and this factor is considered one of the negative aspects in the hydropower field. When do you expect to receive the return?

-You are right. This is a very conservative and long-term business. About 10 years are required to receive returns from the hydropower sector. It seems illogical to make investments in the similar long-term business. On the other hand, this business will operate without additional investments for the next 100 years. Therefore, we are not afraid of making investments in Georgia’s energy sector. We believe in Georgia’s future and development.

– Political stability is one of the important factors for making investments. It is interesting whether you feel political and economic stability in Georgia.

– I believe in Georgian people and I am sure the population will not let any negative take place in the country. I would not wish stability, to be true, because stability leads to stagnation. Continuous processes should be developed in the country so as politicians be smart and mobilized. I do not expect either current or future Authorities to take any illogical steps. I see from my relations with politicians and businessmen their goal is EU integration and the development of Georgia. I am glad the current Authorities, like the previous Authorities, have been following this course and indeed, this is wonderful.

– We know you are implementing other business projects too, besides energy projects. Namely, you are reported to be planning a construction of a huge residential complex. What would you say about this information?

– We have purchased an about 3.3 million square meter land from the Georgian Authorities near Tbilisi. This will be an entirely different settlement with new concept. This settlement will include 1200 energy efficient houses, nursery schools, hotels and restaurants. The project is valued at over 1 billion USD. The project will be implemented stage by stage and the first portion of the investment will be 15-20 million USD. The complex will also include a European-standard gulf playground. An international level architect is leading the construction project and this is a very important factor. The first stage will be completed at the end of 2016 and first houses will be sold in the same period. The project will be fully finished at the end of 2017. The Authorities provide overall support and they have pledged to make motorways and perform all other required jobs.

– Businessmen always provide the comprehensive exploration of the target country’s investment environment prior to making investments in it. It is interesting whether you take into account international ratings like Doing Business and so on.

-To be frank, this is not important for me. I take decisions independently and I do not need to follow recommendations. It is my decision whether to believe or not in this or that country. I do believe in Georgia.

– Where do you see main challenges? Which directions should be enhanced?

-I believe the country lacks for investments and this is a major problem. Another and a very important problem is high interest rates on loans. There are few business companies which are able to serve similar interest rates. I understand consumer loans terms, but in case of the business sector, only narcotics business would enable to serve these rates. These factors frustrate the development and the Authorities bear major responsibility for this. Interbank competition should intensify. Today I have impression commercial banks have colluded high interest rates. At the same time, the Authorities must not stop counter-corruption efforts.

– What would you suggest the Georgian Authorities to draw more investors?

– I would like to stress the Georgian Government is working much harder on the issue than all other countries we have been working in. I would only suggest the government to follow the Estonian sample and abolish the profits tax. Initially, the budget revenue may decline, but, in general, everything will be different: GDP and the whole economy will grow.